REVENUE

We separate our goods and services among:


•	Point of Care laboratory products including instruments, consumables, and other services;


•	Point of Care imaging products including instruments, software and services;


•	Single use pharmaceuticals, vaccines, and diagnostic tests primarily related to companion animals; and


•	Other vaccines and pharmaceuticals related to our OVP segment

Revenue from our CCA segment consists of Point of Care laboratory products, including instruments and consumables, Point of Care imaging products, and single use diagnostic and other tests, pharmaceuticals and biologicals. Point of Care laboratory products are generally sold under a long-term subscription agreement with the instrument portion of the sale accounted for under Topic 840, Leases, as either an OTL or STL. For STL, we apply the provisions of ASC 606 to determine the point in time when control is transferred to the customer, generally when installation of the instrument occurs. Related profit and derecognition of the asset from the Company's balance sheet follows prescribed guidance under ASC 840. Revenue recognized under this topic was approximately $1.5 million in the three months ended March 31, 2018. Approximately $0.8 million of instrument sales related to the outright sale of instruments to customers, which also included shipping and preparation fees. Consumables are critical to the use of the Point of Care laboratory instruments and are used one-time, requiring frequent replacement in the customer's operating cycle. Revenue recorded related to sales of consumables was $10.8 million in the three months ended March 31, 2018. Other services, such as extended service plans and repairs, resulted in approximately $0.5 million of revenue in the three months ended March 31, 2018.

Point of Care imaging products for instruments and software are generally sold outright to customers and recognized upon shipment, which is generally the point in time when control transfers to customers. Revenue of approximately $5.1 million was recognized in the three months ended March 31, 2018. Rental agreements, generally accounted for as OTLs under Topic 840, Leases, resulted in approximately $0.3 million of rental revenue in the period ended March 31, 2018. Service revenue, including extended warranty revenue, of approximately $0.6 million was recognized in the three months ended March 31, 2018.

Revenue from single use diagnostic and other tests, pharmaceuticals and biologicals as well as research and development, licensing and royalty revenue, represented approximately $7.2 million of our revenue for the three months ended March 31, 2018. Of the $7.2 million of revenue, approximately $0.1 million related to license and royalty income.

Revenue from our OVP segment consists of revenue generated from contract manufacturing contracts and other license and research and development revenue. Revenue from contract manufacturing contracts and other license and research and development was $5.7 million and $0.2 million, respectively, in the three months ended March 31, 2018.

Remaining Performance Obligations

Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. Remaining performance obligations include noncancelable purchase orders, the non-lease portion of minimum purchase commitments under long-term supply arrangements, extended warranty, service and other long-term contracts. Remaining performance obligations do not include revenue from contracts with customers with an original term of one year or less, revenue from long-term supply arrangements with no minimum purchase requirements or revenue expected from purchases made in excess of the minimum purchase requirements or revenue from instruments leased to customers. While the remaining performance obligation disclosure is similar in concept to backlog, the definition of remaining performance obligations excludes leases and contracts that provide the customer with the right to cancel or terminate for convenience with no substantial penalty, even if historical experience indicates the likelihood of cancellation or termination is remote. Additionally, the Company has elected to exclude contracts with customers with an original term of one year or less from remaining performance obligations while these contracts are included within backlog.

As of March 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $72.6 million. As of March 31, 2018, the Company expects to recognize revenue as follows as (in thousands):



Year Ending December 31,	Revenue
2018 (remaining)	$	15,987
2019	17,962
2020	14,459
2021	10,758
2022	7,609
Thereafter	5,813
	$	72,588

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue, customer deposits and billings in excess of revenue recognized (contract liabilities) on the Condensed Consolidated Balance Sheets. In addition, the Company defers certain costs incurred to obtain a contract (contract costs).

Contract assets - Most of the Company’s long-term contracts are billed as product is shipped. Therefore, because the Company does not recognize revenue prior to invoicing, there are no contract assets.

Contract liabilities - The Company receives cash payments from customers for licensing fees or other arrangements for a specified term. These contract liabilities are classified as either current or long-term in the Condensed Consolidated Balance Sheet based on the timing of when the Company expects to recognize revenue. As of March 31, 2018 and December 31, 2017, contract liabilities were $11.0 million and $12.3 million, respectively, and are included within current portion of "Deferred revenue" and the non-current portion of "Deferred revenue, net of current portion, and other" in the accompanying Condensed Consolidated Balance Sheet. The decrease in the contract liability balance during the three-month period ended March 31, 2018 is $1.6 million of revenue recognized during the period that was included in the contract liability balance at the date of adoption, offset by $0.3 million of additional deferred sales in the first quarter of 2018.

Contract costs - The Company capitalizes certain direct incremental costs incurred to obtain a contract, typically sales-related commissions, where the recognition period for the related revenue is greater than one year. Contract costs are classified as current or non-current "Contract acquisition costs" in the Condensed Consolidated Balance Sheet based on the timing of when the Company expects to recognize the expense and are generally amortized into earnings with a certain percentage recognized immediately based upon placement of the instrument with the remainder recognized on a straight-line basis (which is consistent with the transfer of control for the related goods or services) over the term of the contract. Management assesses these costs for impairment at least quarterly on a contract by contract basis and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The balance of contract costs as of March 31, 2018 and at the date of adoption was $2.4 million and $2.4 million, respectively. Amortization expense for the three-month period ended March 31, 2018, was $0.2 million. The costs to obtain a contract where the amortization period for the related asset is one year or less are expensed as incurred and recorded within selling and marketing expenses and general and administrative expenses in the accompanying Condensed Consolidated Statement of Income.

Contract liabilities and costs are reported on the accompanying Condensed Consolidated Balance Sheet on a contract-by-contract basis whereas contract costs are calculated and reported on a portfolio basis.